[jeff]

Free Study Planner, Notes, Audio, Flashcards: https://www.another71.com/cpa-exam-study-plan/

Free CPA Exam Survival Guide: https://www.another71.com/cpa-exam-survival-guide/

Post by Another71.

Jeff Elliott, CPA (KS) | Another71 | NINJA CPA | NINJA CMA | NINJA CPE

[BEACPA]

cpasucks23,

Kent Corp. is a calendar year accrual basis C corporation. In Year 1, Kent made a nonliquidating distribution of property with an adjusted basis of $150,000 and a fair market value of $200,000 to Reed, its sole shareholder.

Facts:

Reed's basis in Kent stock at January 1, Year 1 $ 500,000

Accumulated earnings and profits at January 1, Year 1 125,000

Current earnings and profits for Year 1 (from operations) 60,000

The recipient shareholder includes the FMV (200,000 in this case) of the property income to the extent of earnings and profit (E&P). Note that we currently have E&P of 185,000 (125,000 + 60,000). Be careful! Only knowing what I have stated so far, a person would be inclined to go with 185,000. Here's what we must know. The corporation recognizes gain as if the property had been sold (i.e., FMV less adjusted basis). In other words, the this gain increases their current E&P by 50,000 – thus raising it to 235,000. Here's the math

200,000 FMV or property

(150,000) subtract the adjusted basis

50,000 gain is recognized by the C corp so now we have E&P of 235,000 (125K + 60K + 50K)

Since we recognize property income to the extent of E&P, our answer is 200,000. I hope this helps.

Wishing you the best!

FAR - 2/28/14 PASS Praise be to God!
AUD - 7/5/14 PASS Praise be to God!
BEC - 11/29/14PASS Praise be to God!
REG - 2/28/14 PASS Praise be to God!

[lauren725]

great explanation, BEACPA. I just went over that question myself.

AUD - 73,91
FAR - 79 - Thank you God!
BEC - 73,79!!!!
REG - 92 whatttt??!

I used Becker review + flashcards, Ninja Audio, Ninja MCQ supplement on BEC and REG.

Done! Praise God!

[Anonymous]

@cpasuck Somebody posted this same question (page 37) The difference on the question was on the info about Current earnings and profits for Year 1 60,000. One states “from operation” (correct answer is B) while the other states “including effects of this distribution” (correct answer is C).

[BEACPA]

Lauren725,

Thank you! My exam is on the 28th of February – only a day apart. May you have excellent recall when you set for the exam and insight to understand as you go over your notes, lectures, MCQs etc.

Are you currently working on C corps? If not where are you at in your studies? I'm finishing up R6 on BLAW. Wishing I was into R8 by now. I find the tax sections to be so taxing (no pun intended). I know I'll need sufficient time to go back and review taxation. Thus, I'm in a mad rush to knock out R8 by next week so I can begin my review.

Cheers!

FAR - 2/28/14 PASS Praise be to God!
AUD - 7/5/14 PASS Praise be to God!
BEC - 11/29/14PASS Praise be to God!
REG - 2/28/14 PASS Praise be to God!

[Anonymous]

@BEACPA and @NJPRU – You both mentioned that when property is distributed to a shareholder, the FMV of the property becomes to the basis to that shareholder. Is this only true for non-liquidating distributions? Also, is there a case where the basis of the property distributed becomes the basis to the shareholder receiving the property? Or is basis only used when a shareholder or partner contributes property for partnership interest/stock ownership.

[lauren725]

BEACPA – thanks for your kind words, good luck to you too! I still have 6 of 8 sections to go over in Chapter 8. I have been simultaneously reviewing information from chapters 1 and 2 (last week) and 3 this week. I am going back and forth at this point because I know I need more time to review earlier chapters. I work in tax and so a lot of it interests me (but no I don't understand it all by any means lol) so I do want to be able to get a good grasp on ch. 1-4 before moving on to review BLAW. I have found BLAW to be a more challenging to me, but it is all fair game! Chapter 7 and part of 8 seem the most challenging so I will need a lot of time the last few weeks for those I am sure.

AUD - 73,91
FAR - 79 - Thank you God!
BEC - 73,79!!!!
REG - 92 whatttt??!

I used Becker review + flashcards, Ninja Audio, Ninja MCQ supplement on BEC and REG.

Done! Praise God!

[s2sylvir]

@Cracked Are you asking about C Corps, S Corps, or Partnerships?

BEC - PASS (79)
AUD - PASS (63, 71, 74, 74, 83)
REG - PASS (88)
FAR - PASS (58, 89)

Becker for all + FAR 10 Point Combo

[Anonymous]

@s2sylvir – Let's discuss all three.

[knicks92]

So in about 24 hours from now, I will be taking REG. Currently doing my last review of R3/R4 and plan on doing a Becker practice test in the afternoon. Than plan on just reading my highlights and bullet points of business law before taking it easy for the rest of the day/night.

I am excited to be done with this just because I am pretty sick of tax being a part of my life 24/7 for the past month. I am also nervous because although I feel prepared, I know there will definitely be questions that are extremely difficult that will try to diminish my confidence.

I will make sure to let you guys know about my experience asap since I found it to be helpful to read about other experiences in the past. I wish everyone here good luck and hopefully we can all see each other on the other side within the next few weeks.

@lauren: I found blaw to be extremely challenging also but if you keep going at it I promise it gets better. This is coming from a guy who never did well in any of his undergraduate law courses.

Tough times don't last. Tough people do.

B: 88
A: 77
R: 89
F:

[lauren725]

Good luck Knicks! I hope your test goes well. That is good that the BLAW comes easier after repeating it. Thanks for the encouragement. Looking forward to hearing about your practice test and test tomorrow.

AUD - 73,91
FAR - 79 - Thank you God!
BEC - 73,79!!!!
REG - 92 whatttt??!

I used Becker review + flashcards, Ninja Audio, Ninja MCQ supplement on BEC and REG.

Done! Praise God!

[NAT]

Hello everybody,

I am a brand new person in this REG-section. Taxation is not beloved thing to me but it is a very serious part of the CPA examination and we admit it.

Could anybody tell me why REG FORUM at http://www.another71.com is always a leader, every quarter, including 2015, Q1. For instance, effective today: REG Forum has 42 pages versa FAR (19 pages), AUD (24 pages) and BEC (18 pages). Is it about taxation legislation and all IRS'a Publications in general are so controversial/ not clear that people want to clarify so many cases/problems, etc. which involve individual and corporate income ? Thanks and excuse me if that is a stupid question to you.

FAR - 07/2015
AUD - TBD
REG - TBD
BEC -TBD

We suffer one of two things in our life. The pain of discipline or the pain of disappointments.
When you are disciplined, there is no pain of disappointments.

[Anonymous]

I am a keen observer myself. Last year, this was not the case. I noticed in Q1 and Q2, FAR got more posts than any other study group.

So IMO, it's whenever I am taking it, LOL. Just kidding.

[Anonymous]

Robert had current-year adjusted gross income of $100,000 and potential itemized deductions as follows:

$12,000 Medical expenses (before percentage limitations)

$4,000 State income taxes

$3,500 Real estate taxes

$10,000 Qualified housing and residence mortgage interest

$4,500 Home equity mortgage interest (used to consolidate personal debts)

$5,000 Charitable contributions (cash)

What are Robert's itemized deductions for alternative minimum tax?

a. $21,500

b. $17,000

c. $25,500

d. $19,500

Explanation

Choice “b” is correct. Robert's itemized deductions for alternative minimum tax purposes are calculated as follows:

+$2,000 Medical expenses (exceeding 10% of AGI)

0 State income taxes (not allowed)

0 Real estate taxes (not allowed)

+$10,000 Qualified housing and residence interest

0 Home equity mortgage interest (not used to buy, build, or improve the home-not allowed)

+$5,000 Charitable contributions (no difference)

=$17,000 Alternative Minimum Itemized deductions

I am so confused with the notes which Tim Gearty instructed for the candidates to write/remember on R2 lectures.

What did he mean by “Home mortgage is okay; home mortgage is not added back for AMT; charity is NOT an add-back for AMT.”

So why are we adding the qualified housing and residence interest and charitable contributions above? Please help. Thanks!

[Anonymous]

@Amor – I think you are getting a little confused on the call of the question here. When he says “add back”….he is referring to the AMTI. The question here is what is the itemized deduction when calculating AMT, so those items listed are ok to be itemized when calculating AMTI.

[Anonymous]

@Cracked, thanks. I am not a little confused, overly confused!

I think it's my English comprehension problem. I need to take some more English 101 classes. And with this AMT, I am in a panic mode indeed.

[Author]

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